RESEARCH: Anheuser should be wary of SABMiller threat

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Anheuser-Busch, the brewer of Budweiser, the world's best selling beer, has everything to play for despite an increasingly competitive home market, says a new report from Canadean. The flagship brand may be losing some drinkers but the majority only appear to be defecting to sister brand Bud Light.

But, despite A-B's continuing domestic and international success, Canadean warns that last year's merger of SAB and Miller will see the company coming under attack at home. Ideally A-B should regain the official sponsorship of the National Football League, which it lost to Coors in 2002. Otherwise SAB/Milller may acquire it and use the opportunity to promote its own brands ahead of Budweiser.

Domestically, increases in profits per barrel have been facilitated through price rises and profit levels have been augmented through stringent operational efficiencies to generate returns which are ploughed back into maintaining brand awareness. Although the international approach is broadly similar, A-B also aims to focus principally on areas of the world that have significant profit potential and seek investment in leading brewers with high growth high margin markets. Above all it seeks to grow the Budweiser brand.

For the future Canadean believes that resolution of A-B's legal dispute with Budejovicky Budvar is a priority as international brand presence has already been significantly diluted over the years. It could also lead to increased advertising efficiencies by giving the company the freedom to show replicated adverts in a wide variety of markets.

Looking critically at some of the company's actions Canadean asks why weren't the proceeds of a recent sale of a theme park ploughed into the beer division rather than into its secondary business - since AB's stated priority is to reinvest in its core business? And how does the company's strategy of getting involved in growth areas square with decision to invest so heavily in the UK where the beer market is saturated?

However A-B's style is nothing if innovative. The company's second oldest brand Michelob was recently the subject of a new variant, Micehlob Ultra, rolled out with a $50m campaign aimed at the increasing number of consumers trading up to light brands.

The fast development of the 'ready to drink' market has also tempted A-B to forge an alliance with Bacardi Martini to produce Bacardi Silver, hoping to attract some of the market that Diageo created through its record selling Smiroff Ice.


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